An open title occurs when a vehicle is sold and the owner signs off on the pink slip, but ownership is never transferred to the buyer’s name. An open title may be the result of the buyer losing the certificate of title before transferring ownership. There are also several situations where titles are left open intentionally. In Tennessee, as in the rest of the country, leaving a title open intentionally is illegal and poses risks to both the original seller and the second buyer.

Reasons for Leaving a Title Open

Titles are left open intentionally for two primary reasons: to avoid paying the sales tax on the purchase of the vehicle, and for unlicensed dealers to be able to sell cars without being recorded as the owner of the vehicle. In both cases, the buyer’s section of the title will be left blank because the intention is to sell the vehicle as quickly as possible. Unlicensed dealers, also referred to as Curbstoners, benefit from leaving titles open because they won’t be recorded as selling vehicles that would require being licensed and regulated as legitimate auto dealers.

The Risks of Buying a Vehicle with an Open Title

The biggest risk of buying a vehicle with an open title is that there may be issues that prevent the transfer of ownership. The two primary factors that can prevent the transfer of ownership are liens that have been placed against the title, and the vehicle being reported as stolen but not recovered. If a lien has been placed against the title, ownership cannot be transferred until the amount due to the lien holder has been paid in full. If the vehicle has been reported as stolen, the car may be impounded, putting the buyer out of luck in terms of the money paid for the vehicle or the financing used to purchase the car.

Open Title Risks to the Seller

The biggest risk when a title is left open is that the seller remains liable for the vehicle despite signing away ownership. In situations where the title remains open for an extended period, the seller may finally be made aware that the title has been left open when vehicle registration papers from the state, or moving violations and parking tickets from state and local police departments, start arriving in the mail long after the sale has been completed. In Tennessee, the seller can send in a release of liability to the Department of Safety, which will stop the mailing of registration forms, moving violations and parking tickets. In the event of an accident, however, the final determination of liability may be decided in a court of law.

Avoiding the Risks of Open Titles

For the buyer, an open title can be discovered by asking the seller for a picture identification. If the ID doesn’t match the seller’s name on the certificate of title, it has been left open. At that point, the buyer should take steps to ensure that the transfer of ownership can be executed before finalizing the purchase. This can be done by taking the vehicle identification number to the Tennessee Department of Safety and running a check on liens and stolen vehicle reports. The seller can mitigate risks either by asking the buyer to complete the transfer section on the title at the time of the sale, or doing all the paperwork at a Tennessee DOS or AAA office.

References

About the Author

After working for 21 years as a licensed adviser specializing in corporate and private finance, Scott Krohn began his writing career in 2008 covering a variety of topics including business, personal finance, health, and IT. He graduated from Cal State University, Long Beach with Bachelor of Arts degree.